"The 0.2pc rise in UK GDP in Q2 shows that the economy has weakened dramatically even before the full impact of the credit squeeze and housing downturn has been felt. An outright recession is now our central scenario," he said.

The news will only intensify the political pressure on the Labour Government as voters get squeezed by the combination of slowing growth and rising prices for basic staples such as food and petrol.

"A recession is probable," said Steven Bell, chief economist at GLC. "We'll get negative growth for the next two quarters. We're now looking at quite deep interest rate cuts next year."